Gov’t will go after locals fronting for foreign firms – VP Jagdeo

…says administration will plug loopholes, strengthen Local Content Laws

The practice of fronting, which has seen foreign companies using local ones to bypass laws, is one the People’s Progressive Party/Civic (PPP/C) Government intends to crack down on; including on the local end of this unethical practice. This was revealed by Vice President Bharrat Jagdeo on Thursday.
According to the Local Content Act, a company wanting to present itself as a local one must have Guyanese in at least 75 per cent of its executive and senior management positions, and at least 90 per cent in non-managerial and other positions. Guyanese must also have beneficial ownership of at least 51 per cent of the company.
To bypass these provisions, however, some companies have resorted to “fronting”, by placing Guyanese in specific positions to create a façade of compliance. Jagdeo has made it clear that local companies and individuals who are complicit would face the consequences.
“The foreign companies…are using locals as a front, this is particularly as it relates to registration under the Local Content Act (LCA). That’s where it makes sense, so that they can enjoy benefits that are reserved for our people, in the Act for our people. And so, the local companies that are complicit in this will face consequences also, not just the foreign companies,” he said.
“A lot of those…soon we’re going to start checking on this issue, and we have to. In the update of the Local Content Law, we will plug some loopholes and strengthen the enforcement and penalties for doing so. But right now, the GRA is looking to add some of these companies because, by fancy accounting, they’re defeating the purpose of the Act and, with the complicity of local individuals, defeating the purpose of the Act — which is to give preference to our people,” he explained.
According to Jagdeo, the Government has already started discussions with the Commissioner General of the Guyana Revenue Authority (GRA), Godfrey Statia, on how best to proceed.
He also highlighted one loophole that companies are using. “So, we’ve started. We had a discussion with the Commissioner General about this matter. We’re looking at it carefully, because you have to show ownership of the company, more than 50 per cent ownership of the company. Some of the foreign companies coming in, they’re giving notionally a 50 per cent ownership, but then they’re getting paid all sorts of fees for the services they provide, so it’s not a real benefit for those Guyanese,” Jagdeo further said.

“Rent-a-citizen”, or “fronting”, refers to the unethical practice in which foreign companies use local individuals or local entities as mere fronts to meet local content requirements, while the actual control and benefits remain with the foreign entity. Only a few days ago, the Natural Resources Ministry had announced it was teaming up with the Guyana Revenue Authority (GRA) to intensify efforts to clamp down on “rent-a-citizen” and “fronting” practices being undertaken by companies in the oil and gas sector. The Ministry, on Monday last, announced that through the Local Content Secretariat (LCS), it has intensified its tracking for practices known as “rent-a-citizen”, or “fronting”, by companies within the oil and gas sector.
In December 2021, the National Assembly passed the Local Content Act, which outlines 40 different service areas that oil and gas companies and their subcontractors must procure from Guyanese and Guyanese-owned companies. Those include 90 per cent of office space rental and accommodation services; 90 per cent of janitorial services, laundry and catering services; 95 per cent pest control services; 100 per cent local insurance services; 75 per cent local supply of food; and 90 per cent local accounting services.
The Local Content Act mandates penalties such as fines ranging from $5 million to $50 million for oil and gas companies and their sub-contractors who fail to meet the minimum targets of the legislation, as well as those who are in breach of the Act. (G-3)